Technical Efficiency Across Agro-Ecological Zones in Ethiopia: The Impact of Poverty and Asset Endowments

Currently, Ethiopia focuses on agriculture so that it can spur growth in other sectors of the economy. In order to help policy makers understand factors affecting agriculture, studies on efficiency are important. Especially, the impact of poverty and asset endowments could be highly pronounced in an agrarian country such as Ethiopia. In this regard, the objectives of this study are two fold: to investigate efficiency variations across agro-ecological zones and to examine the impacts of poverty and asset endowments on inefficiency in the study area. Data were collected from 254 randomly selected households. Stochastic frontier production function was estimated and the results of the analysis revealed a mean technical efficiency of 75.68%. F-test also showed a statistically significant difference in technical efficiency among agro-ecological zones. On the other hand, maximum likelihood estimates indicated positive and significant elasticities for asset endowments including physical (land and draft power), financial (credit access and market) and human (labor and education). However, poverty was found to reduce efficiency levels significantly. Thus, future endeavoers should envisage better market and education access and reduced liquidity constraints.